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Earnings Plays on STP and JOYG and Level Outlook From Wednesday's 12:51 Alert to Members

|Includes: JOY, Suntech Power Holdings Co., Ltd. (STP)
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Our final featured comment of the day was Phil's Afternoon Chart for Members:

Phil - June 2nd, 2010 at 12:50 pm | 

Critical numbers/Fizz - I don’t usually worry about stock-specific numbers but it is a serious issue on indexes.  On my 5% Rule, we throw out spikes and, frankly, I think it’s always a good idea to throw out spikes adn that maens that 6,451 on the NYSE is a meaningless bit of data as it didn’t even last an hour.  Going back to March, it’s the 6,650 line that seems to firm up as a serious support and that’s right what we bounced off today.  If we look at the NYSE topping out at 7,500 (thowing out all of April’s silliness) then a 10% move down is 6,750 on the button and 5% is 7,125, which is currently the 200 dma.  Since the NYSE bottomed out (ignoring spikes) at 5,000, 7,500 is a logical spot for a top and that 2,500-point run has a logical pullback of 20% to 7,000.  Since we topped out at 10,000 on the NYSE, I am pretty comfortable using these levels as major indicators and that leaves us looking at 6,750 as a "must hold" line, 7,125 as "improving" and 7,250 as our recovery zone that takes us up to a new trading range.  

Below 1%/SNS - At this point, I think even blowing our current bounce support would be a bad sign.  Dow 10,150, S&P 1,085, Nas 2,250, NYSE 6,750 and RUT 650.  Not holding those into the close is going to be a real sign of weaknes.  Where we are right now is nothing more than the top of the decending channel I drew out in yesterday’s chat.

HOV is not an earnings play, Dilbert.  HOV is longer-term.  I’m not very excited by tonight’s other earners but JOYG and STP report tomorrow morning and those should be fun. 

JOYG has very low expectations for earnings but I think the Q was good, it’s the outlook that concerns me.  Fortunately, it also concerns a lot of people so I do like selling the July $45 puts for $2 and the July $55 calls for $2.65 while going long with Oct $60s at $3.60.  This is similar to the AAPL play but we’re adding the puts as they are rollable and JOYG is a nice little company to get stuck with long-term, even if they miss.  To the upside, you can’t lose on the caller without beating the putter and then it’s a rolling game that puts us net positive on the stock wit a -$1.05 basis on the $5 spread with 3 months to roll

STP is another beaten-down solar play and they report tomorrow morning.   They are a Chinese ADR and China is pushing alt energy stimulus so I expect nice noises from management but this is a very speculative play that we take the money and run on if all goes well:    $9 puts can be sold for .47 and that can offset the purchase of the $9 calls at $1 but, if this goes badly, you end up owning STP for net $9.53, about the current price so be careful!

Disclosure: Positions as indicated but subject to change